Williams AP Macroeconomics Exam Latest 2023

Williams AP Macroeconomics Exam Latest 2023 Positive Economics - the analysis of facts or data to establish scientific generalizations about economic behavior Normative Economics - Beliefs, or value judgements about what ought to be. Normative statements cannot be true or false; they can only be assessed relative to beliefs and value judgements. Microeconomics - the study of how households and firms make decisions and how they interact in markets Macroeconomics - the study of economy-wide phenomena, including inflation, unemployment, and economic growth Demand Economy - production of goods and services is determined by decisions made in the marketplace Command Economy - An economic system in which the government makes all economic decisions. Real GDP - the production of goods and services valued at constant prices Nominal GDP - GDP measured in current prices. Real Interest Rate + Inflation Deflation - A situation in which prices are declining Disinflation - a reduction in the rate of inflation Structural Unemployment - unemployment that occurs when workers' skills do not match the jobs that are available. technology, etc Cyclical Unemployment - Unemployment that rises during economic downturns and falls when the economy improves. Getting laid off due to a recession is the classic case of this Substitute Goods - Two or more goods that satisfy a similar need, so that one good can be used instead of the other. If two goods are substitutes, an increase in the price of one leads to an increase in the demand for the other. Complimentary Goods - Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely). AS Determinants - 1. Factors of Production 2. Changes in Productivity 3. Business Taxes 4. Technology 5. Expectations AD Determinants - 1. Consumer Spending 2. Investment 3. Government 4. Net Exports 5. Number of Buyers Automatic Stabilizers - Government spending and taxes that automatically increase or decrease along with the business cycle Policy Stabilizers - Monetary and fiscal policy Lags associated with policy stabilizers - 1. recognition 2. implementation 3. effectiveness GNP - the total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments Discount Rate - The interest rate on the loans that the Fed makes to banks Federal Funds Rate - Interest rate banks charge each other for loans. Starts with r on line of reasoning! Government selling bonds - Deficit spending; expansionary FED selling bonds - Contractionary; slows the economy Asset Demand - Holding money as a store of value instead of other assets such as corporate bonds & stocks. Inverse with r Transaction Demand - Holding money as a medium of exchange function. Demand for $ to make purchases. Follows GDP Short Run Phillips Curve - Inverse relationship between inflation and unemployment Long Run Phillips Curve - Relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience Deficit Policy - Expansionary. Run yearly. Government finances by selling bonds Surplus / Deficit Reduction Policy - Contractionary Reserves - deposits that banks have received but have not loaned out Reserve Requirement (fractional reserve banking) - % of money banks deposit that must be kept on hand Free Trade - International trade free of government interference. Always good Tariffs and Quotas - Increases price for domestic producer and consumer. Always bad Short Run Determinates - Affects AD, policy driven Long Run Determinants - Affects AS curve Unemployment Formula - # unemployed ----------------- labor force (labor force is made up of those unemployed + those actually working) Inflation Formula - current years price level minus previous years price level divided by previous years price level times 100 percent CPI this year-CPI last year ---------------------------- X 100 CPI last year Labor Force Participation Rate - the number in the labor force divided by the adult population Injections into the AE Stream - C+I+G+nX!!!! Basically any spending